Important CRA Reminder and Warning for Claimants Issued April 6, 2022
On April 6, 2022, the Canada Revenue Agency (CRA) published a news release stating they have observed a recent increase in Scientific Research and Experimental Development (SR&ED) claims containing false and/or fraudulent information. In the news article, Important reminder for businesses filing SR&ED claims, they remind taxpayers to make sure the information provided in their claim, including information submitted on their behalf by a representative, is valid.
Tax Tip from the CRA
In the new article, the CRA states:
The CRA is committed to making it easier for eligible businesses to claim SR&ED tax incentives. Whether you are a new or returning claimant, a large or a small business, we can help you determine if your work is eligible. Use our Self-Assessment and Learning Tool to find out, up-front, whether your work is likely to qualify for SR&ED tax credits and to calculate your potential SR&ED claim amount. You can also request a free telephone consultation with a SR&ED specialist if you have questions about whether your work is eligible or how to submit a claim.1
The SR&ED Self-Assessment and Learning Tool (SALT) is provided by the CRA in order to help taxpayers:
- understand the definition of SR&ED
- understand what kinds of work are considered SR&ED
- understand if your project might include SR&ED work
- estimate how much of your expenditures are considered SR&ED
- estimate the investment tax credits that you might be eligible for2
The CRA encourages taxpayers to use this tool before filing their SR&ED claims to ensure their work is SR&ED eligible and to what extent their work may be claimed.
Taxpayers may also opt to schedule a Pre-Claim Consultation with a CRA SR&ED reviewer. This resource is available for up to three projects per fiscal year to determine if there is SR&ED work present in them before they are claimed. To be eligible to receive a pre-claim consultation, you must meet the basic requirements for claiming SR&ED tax incentives, and the projects for which you are requesting a consultation must meet the following requirements as stated on the CRA’s website:
- be completed or in progress
- were not already reviewed and given an eligibility determination
- do not involve an issue that is under notice of objection or in litigation3
These tools are free to use and help to avoid any false or inaccurate claims. For more information on the eligibility requirements for SR&ED please review the CRA’s Guidelines on the eligibility of work for scientific research and experimental development (SR&ED) tax incentives.
Before you submit your claim
Within the article, the CRA posed the below tax tip for SR&ED claimants’. Encouraging them to complete the below tasks before submitting their SR&ED claims:
- Review all the information you are sending to the CRA, including information being submitted by a third party representative on your behalf. You are responsible for any mistakes, omissions, or false information in the claim, including information your representative submits.
- Verify that all the required supporting documents are included with your claim.4
The Consequences of Submitting False Information
Regardless of the size or type of business claiming SR&ED it is the claimants’ responsibility to verify the information being submitted and to keep documentation supporting that information. The CRA warns taxpayers in this article that:
If you apply for the SR&ED Tax Incentive Program using false and/or fraudulent information, you will have to repay the amount to which you were not entitled and you may face serious consequences, including interest and penalties. Third parties who knowingly file false or overstated SR&ED claims on your behalf can have civil penalties imposed on them.5
False or misleading statements about SR&ED expenditures should not be made on SR&ED investment tax credits applications, this is a serious offence and is penalized as such.
Conclusion
The content within this article exhibits that the CRA will be looking for more fraud and considers this article a sufficient warning. The CRA asks at the end of the article that if you suspect anyone of providing false or fraudulent activity to report it online at canada.ca/taxes-leads or by calling the National Leads Centre at 1-866-809-6841. Before filing for SR&ED tax investment credits please review the CRA’s SR&ED-related policies, procedures, and guidelines, and take the time necessary to ensure your SR&ED claims are completed as per the CRA’s requirements. Due diligence on the taxpayers’ part will increase the likelihood of their SR&ED claims being accepted as filed. Keep an eye on our page as we will continue to keep our readers updated regarding any changes or updates to the SR&ED program.